Collateral Trust Bond

AAA

DEFINITION of 'Collateral Trust Bond'

A bond that is secured by a financial asset - such as stock or other bonds - that is deposited and held by a trustee for the holders of the bond.

INVESTOPEDIA EXPLAINS 'Collateral Trust Bond'

If the issuing company were to default on the debt obligation, the debt holders would receive the securities held in trust, like collateral for a loan.

For example, say Company A issues a collateral trust bond, and as collateral for the bond it includes the right to Company A shares held by a trust company. If Company A were to default on the bond payments, the bondholders would be entitled to the shares held in trust.

RELATED TERMS
  1. Borrowing Base

    The amount of money a lender will loan to a company based on ...
  2. Trust Certificate

    A bond or debt investment, usually in a public corporation, that ...
  3. Trustee

    A person or firm that holds or administers property or assets ...
  4. Secured Debt

    Debt backed or secured by collateral to reduce the risk associated ...
  5. Trust Receipt

    Notice of the release merchandise to a buyer from a bank, with ...
  6. Collateral

    Property or other assets that a borrower offers a lender to secure ...
Related Articles
  1. Bond Basics Tutorial
    Retirement

    Bond Basics Tutorial

  2. Why should I keep records on my tax-exempt ...
    Taxes

    Why should I keep records on my tax-exempt ...

  3. What determines the price of a bond ...
    Bonds & Fixed Income

    What determines the price of a bond ...

  4. What causes a bond's price to rise?
    Bonds & Fixed Income

    What causes a bond's price to rise?

Hot Definitions
  1. Hyperinflation

    Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. Hyperinflation is ...
  2. Gross Rate Of Return

    The total rate of return on an investment before the deduction of any fees or expenses. The gross rate of return is quoted ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  5. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  6. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
Trading Center